1. MARKETING MANAGEMENT
Adapting marketing for the new economy and Creating Customer Value, Satisfaction, and Loyalty
Kotler Keller

2. Major drivers of the new economy
Digitization and connectivity
Disintermediation and re-intermediation
Online middlemen
Customization and customerization
Individually differentiated products vs. personalized products and channels
Industry convergence
Blurring of boundaries
Disney, Kodak etc

3. Old Economy vs. New Old Economy New economy Organize by product units
Organize by mkt. segments
Focus on profitable transactions
Focus on customer lifetime value
Focus on shareholders
Focus on stakeholders
Marketing does the marketing
Everyone does the marketing
Build brands through advertising
Build brands through performance
Focus on customer acquisition
Focus on customer retention
No customer satisfaction measured
Measure customer satisfaction and retention rate
Over-promise, under-deliver
Under-promise, Over-deliver
Look at the financial scorecard
Look also at the marketing scorecard

4. E-commerce E-commerce vs. e-business Four major internet domains B2C:
Online transactions
Four major internet domains
B2C:
B2B:web procurement
Which is greater? Forrester and Gartner
C2C: information creation
Chat-rooms, blogs, IM,WOM vs. WOW
C2B:
suggestions and complaints

5. E-commerce business-to-employee (B2E) business-to-government (B2G)
government-to-business (G2B)
government-to-government (G2G)
government-to-citizen (G2C)

6. Organizational Charts

7. Customer value and satisfaction
Customer perceived value
Difference between the prospective customer’s evaluation of all benefits and all the costs of an offering and the perceived alternatives.
Total customer value
Perceived monetary value of the bundles of economic, functional and psychological benefits customers expect from a given market offering.

8. Determinants of Customer-Delivered Value
Total
customer
value
Product
value
Personal
value
Customer-
delivered
value
Total
customer
cost
Monetary
cost
Energy
cost

9. Customer value and satisfaction
The real price of anything is the toil and trouble of acquiring it
Satisfaction:
Feeling of pleasure or displeasure resulting from comparing a product’s performance with the expectations.

10. Loyalty A deeply held commitment to re-buy
or re-patronize a preferred product
or service in the future despite situational
influences and marketing efforts having
the potential to cause switching behavior.

11. Measuring Satisfaction
Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor competitive performance

12. Countrywide received the #1 customer satisfaction rating from J. D
Countrywide received the #1 customer satisfaction rating from J.D. Power and Associates

13. Product and Service Quality
Quality is the totality of features and
characteristics of a product or
service that bear on its
ability to satisfy
stated or implied needs.

14. Customer Life Time Value
The present value of the stream of future profits expected over the customer’s lifetime purchases.

15. Estimating Lifetime Value
Annual customer revenue: $5,000
Average number of loyal years: 2
Company profit margin: 10%
Customer lifetime value: $1,000

16. Successful Relationships
Customer
Value
Customer
Retention
Loyal customers
C.V = benefit/costs
Customer
Satisfaction
Performance vs. Expectations

17. Customer Profitability-Focused Marketing
Heavy users, not price sensitive, try new products
Tier 1: Platinum
Tier 2: Gold
Tier 3: Iron
Tier 4: Lead
Heavy users but price sensitive
Spending volume implies no special treatment
Cost the company and generate –ve WOM

18. Framework for CRM Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer

19. CRM Strategies Reduce the rate of defection
Terminate low-profit customers
Focus more effort on high-profit customers

20. Mass vs. One-to-One Marketing
Average customer
Customer anonymity
Standard product
Mass production
Mass distribution
Mass advertising
One-way message
Economies of scale
One-to-One
Individual customer
Customer profile
Customized market offering
Customized production
Economies of scope

21. Customer Retention
Acquisition of customers can cost 5 times more than retaining current customers.
The average company loses 10% of its customers each year.
A 5% reduction to the customer defection rate can increase profits by 25% to 85%.
The customer profit rate increases over the life of a retained customer.

22. The Customer-Development Process
Suspects
Prospects
Disqualified
First-time
customers
Repeat
customers
Clients
Members
Partners
Ex-customers

23. Levels of investment in Customer Relationship Building
Partnership: work contin. with large customers
Proactive: regular contact with customer about product offerings
Accountable: post-sale service and suggestions
Reactive: sells and encourages feedback
Basic: salesperson simply sells

24. Reducing Customer Defection
Define and measure retention rate.
Distinguish causes of customer attrition.
Estimate profit loss associated with loss of customers.
Assess cost to reduce defection rate.
Gather customer feedback.

25. Cost of Lost Customer A company has 64k accounts
It lost 5% of its accounts this year due to poor service. Loss is 3,200 accts (.05* 64k)
Avg. lost acct means a $40k loss in revenue. Total loss in revenue is $128 million (3,200*40k)
If profit margin of company is 10% the total loss for 2009 is (.10*$128 m)=$12.8 million.

26. Total Quality Management
TQM is an organization-wide
approach to continuously
improving the quality of
all the organization’s processes,
products, and services.